Not too long ago, I litigated a case that turned on the enforceability of a pay-if-paid clause. The very good attorneys on the other side argued that the clause at issue was enforceable, such that it excused their general contractor client’s failure to pay. I argued, on behalf of my subcontractor client, that the provision was unenforceable. The trial court agreed with me on summary judgment, which led to a very favorable settlement for my client.
So what was wrong with the clause the parties were fighting over? Among other things, I argued that it did not comply with the requirements set forth in L. Harvey Concrete, Inc. v. Agro Const. & Supply Co., 189 Ariz. 178, 939 P.2d 811 (App. 1997). L. Harvey is the seminal Arizona case on pay-if-paid clauses. It holds that pay-if-paid provisions are enforceable if they meet the following three requirements: